The long-run effects of government spending on structural change: Evidence from Second World War defense contracts

Zhimin Li and Dmitri Koustas

Economics Letters, 2019, vol. 178, issue C, 66-69

Abstract: This paper studies the long-run effects of the largest government spending program in U.S. history – Second World War defense spending – on structural change in local economies. We link a dataset of war supply contracts with economic data at the county level spanning from 1930 to 2000. Using counties that received no defense spending as a comparison group and controlling for prewar characteristics, we find that wartime defense spending led to sustained reallocation of labor to manufacturing and other non-agricultural sectors in war production centers, contributing to the long-term population growth in those regions.

Keywords: Second World War; Structural change; Place-based policy (search for similar items in EconPapers)
JEL-codes: J20 N92 O40 R11 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:178:y:2019:i:c:p:66-69

DOI: 10.1016/j.econlet.2019.02.012

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